EmergingTrendsinTechnology

CommercializationSection1:WrittenReport

For:TheMarylandTechnologyDevelopment

Corporation(TEDCO)

By:McDearmanAssociates&RMDonahueConsulting

June2016

ExecutivesummaryThisstudywascommissionedtosurfaceemergingtrendsandpracticesintechnologycommercializationandtoconsiderthepotentialfitandfeasibilityofeachfortheMarylandTechnologyDevelopmentCorporation(TEDCO)andthestate’sentrepreneurialecosystem.Extensiveresearchandin-depthinterviewswithTargetOrganizations(othereconomicdevelopmentorganizations,universitiesandfederalresearchlabs,andcommercialenterprises)fromaroundthecountryresultedinin-depthprofilesofover20programmodelsthatTEDCOshouldconsiderfortheirpotentialpositiveimpactonMaryland.Oneofthemoststrikingandconsistentfindingsthatemergedfromthisresearchisthatbuildingathrivingentrepreneurialecosystemrequiresmorethananarrayofindividuallysuccessfulprograms–itrequirestransformationalleadershipandacompellingnarrativethatissharedbymembersoftheecosystemandunderstoodbyoutsideactors.AcrosstheU.S.,severalecosystemsthatarguablyhavefewerinnovationresourcesthanMarylandareattainingcomparableprominencebyvirtueoftheirstrong,collaborativeleadershipandvision.Theoverarchingthemeofleadershipandvisionthereforedemandsasmuch,ifnotmore,considerationasspecificprogrammodels.Interviewswithexpertsandprogramleadersinotherstatesconfirmedthatavibrantandcollaborativeentrepreneurialecosystemrequiresaleader,orgroupofleaders,thatwillstepbeyondtheirownorganizations,serveasaneutralthirdparty,andconsistentlychampiontheoverallcause.Themostimportantattributesoftheseleadersareacommitmenttoongoingresearchrelatedtothelocalecosystem,theabilitytodevelopanddeliveraconsistentnarrativeforthestateorregion,andthecapacitytobeahighlyengaged‘dotconnector’thatunifiesandcoordinateskeylocalplayers.Asopposedtoonlylookinginwardattheirownorganizationsandrelatedperformance,theseleadersmustspendatleastasmuchoftheirtimeandenergylookingoutward,withafocusontheentirespectrumofservicestocompanies,thelocalecosystem,andmoreintentionallyconnectingtheirlocalregionstoothernationalandglobalecosystemsandplayers.Entrepreneurialecosystemsdonottendtothrivewithtop-downorbureaucraticstructures,sotheseleadersandtheirorganizationsmustbecomfortableoperatingwithinamorefluid,organicnetworkthatconsistsofadiversesetofprivate,public,andnot-for-profitorganizations.Thefindingsforthisprojectareorganizedaroundatechnologycommercializationframework.Itservesasalensthroughwhichtoviewtrendsandprograms,currentTEDCOresponsibilities,andgapsandopportunitiesinMaryland’secosystem.Theframeworkisorganizedintothreebasiccategoriesbasedonhowacompanynormallyformsandmovesthroughthephasesofthecommercializationpipeline,inadditiontotheoverarchingcategory,ortheme,ofleadershipandvision:

• Leadershipandvision:lookingoutwardtochampionanddrivetheentireecosystem,withinthestateandbeyond

• Pre-pipeline:fosteringacultureofentrepreneurshipandinclusiveness• CurrentTEDCOpipeline:providingintensesupportandseedfundingforestablished

earlystagetechfirms,frombasicresearchthroughscaleup• Post-pipeline:ongoingsupportandconnectingfromscaleupintothemiddlemarket

stage

Withinthefourcategoriesofthisframework,the20profilesofprogrammodels,plussidebarsandlinksrelatedtomanyotherexamples,areorganizedbythemeforeasyevaluation,suchasinclusiveentrepreneurshipandpre-acceleratorsinthepre-pipelinephaseorexportsandmergersandacquisitionsinthepost-pipelinephase.Basedonthisanalysis,therearethreegeneraldirections(orcombinationsofthem)thatTEDCOmustconsider:1)doubledownonitscurrentpipeline(focusexclusivelyandwithgreaterresources),2)extendprogrammaticreachintopre-and/orpost-pipelinephases,or3)committobecomingatrue,visionaryecosystemleader.BecauseTEDCOmustdetermineitsownvisionanddirectionbeforemovingforwardwithanynewprograms,thisreportdoesnotprovidespecificrecommendations.Itdoes,however,provideaframeworkforevaluation,asetofpotentialnewprograms,andaseriesofimplicationquestionstoaidTEDCOindeterminingitsfuturedirectionandassociatednewactivities.

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1.IntroductionTheMarylandTechnologyDevelopmentCorporation(TEDCO)isaneconomicdevelopmentorganizationwhosepurposeistogrowMaryland’stechnology-basedeconomybycreatinghigh-payingjobsandexpandingthetaxbaseinthissector.ItwasestablishedtofacilitatethetransferandcommercializationoftechnologyfromMaryland’sresearchuniversitiesandfederallaboratoriesintothemarketplaceandtoassistinthecreationandgrowthoftechnology-basedbusinessesinentrepreneurshipinallregionsoftheState.TEDCOservesthispurposeprimarilybyofferingearlystageseedfundingandrelatedprogrammaticsupporttoestablishedstart-upsinthestate.Giventhedynamicnatureoftechnologyandentrepreneurship,TEDCOconstantlyseekstoadaptexistingprograms,anddevelopnewones,toachieveitsmissionandbestmeetthechangingneedsofitscoremarket.ThepurposeofthisstudyistogatherinformationaboutnewandusefulprogramsdevelopedbyTargetOrganizationsandusetheresultstoinformTEDCO’supcomingstrategicplanningeffortsandimproveoverallorganizationaleffectiveness.Acompanionstudy,beingconductedbyFireDriveMarketingGroup,providesanassessmentoftheneedsoftheMarylandentrepreneurialecosystem,howwellthoseneedsarebeingmetbyTEDCOanditsecosystempartners,andthepublicperceptionofTEDCO.2.StructureandApproachThisreportisorganizedaroundatechnologycommercializationpipelineframework.TEDCO’sresponsibilitiescurrentlyspanaclearlydefinedportionofthispipeline,frombasicresearchthroughinitialventurecapitalinvestment.PartofthisreportisdedicatedtoexploringinnovativepracticesbeingimplementedbyTargetOrganizationswithinthisspanofthepipeline.However,thereportalsoexaminesconceptsandprogramsthatfalloutsideofTEDCO’scurrentareasoffocusandresponsibility,butthatareimportanttocompaniesworkingtheirwaythroughthepipelinefrompre-start-upthroughmiddlemarketstages(beyondwhereacompanywouldtypically‘graduate’fromTEDCOservices).TheserepresentopportunitiesbeingacteduponbyTargetOrganizationsinotherstatesthatTEDCOcouldfeasiblyimplement,orincentivizeand/orencourageotheractorstotakeon.Thisreportorganizesemergingtrendsandpracticesintofourbasiccategories:

• Leadershipandvision:lookingoutwardtochampionanddrivetheentireecosystem,withinthestateandbeyond.Creatingamorevibrantandrobustecosystembydevelopingaresearch-drivennarrative,leadingplace-makingefforts,andsettingtheoverallentrepreneurialecosystemstrategy.

• Pre-pipeline:fosteringacultureofentrepreneurshipandinclusiveness.Ensuring

thatamorediverse,qualified,andsustainablestreamofentrepreneursandfirmsarecommercializingtechnologyandreceivingfundingandsupport.

• Currentpipeline:providingintensesupportandseedfundingforestablishedearly

stagetechfirms,frombasicresearchthroughscaleup.Fosteringtechnology

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commercializationfromresearchlaboratoriestocommerciallyviablebusinessenterprises.

• Post-pipeline:providingongoingsupportandconnectingfromscaleupintothe

middlemarketstage.Continuetofocusonfirmsthathavealreadyreceivedseedfundingorventurecapital,butmayhaveadditionalneedsrelatedtoaccessingnewfundingroundsandmarkets,attractingtalent,orfindingstrategicM&Apartners.

Fromthecompanyperspective,movementthroughthepipelineatvariousstagesofgrowthwouldideallybeseamless,characterizedbyuniformlyrobustprogramsandservicesthataremanagedbyvariousplayersinacohesiveecosystem.Thisframeworkallowsgapsandshortcomingsintheecosystempipelinetobemorereadilyidentified.PotentialDirectionsforTEDCOThisreportisdesignedtoprovideanoverviewofemergingandcompellingpracticesandtrendsinentrepreneurshipandtechcommercialization,butisnotdesignedtoprescribeacertainstrategyorcourseofaction.AlloftheprogrammodelsandexamplespresentedinthisreportcouldpotentiallybringvaluetoMaryland’stechfirms.UltimatelyTEDCOwillhavetosetitsownvisionandestablishitsdesiredroleintheecosystemtodeterminewhichoftheseprogramsitshouldincorporate.Further,TEDCOmustbetterdefineMaryland’sentrepreneurialecosystem,asexistingplayersintheecosystemdonotseemtohaveacommonunderstandingorreadyabilitytodescribeit.Basedontheanalysisinthisreport,therearethreegeneraldirections(orsomecombinationofthethree)thatTEDCOcouldtake.

• DoubledownonTEDCO’scurrentpipeline:TEDCOcouldfocusexclusively,andwithincreasedresources,ontakingstartupsfromproofofconceptthroughscaleupandcommittoensuringthatithasthebestprogramspossibletoservethisphaseofthepipeline.TEDCOisalreadyconsideredhighlyeffective,bothlocallyandnationally,atdeliveringfundingandprogramswithinthisspecificphaseoftheoverallpipeline;however,thereisroomforimprovementandgrowth.

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• Extendprogrammaticreachintopre-and/orpost-pipelinephases:TEDCOcouldretainitscurrenttacticalfocusondeliveringfundingandsupportprogramstoestablishedearlystagefirms,butextenditsreachearlierand/orlaterinthepipeline.

• Committobecomingatrue,visionaryecosystemleader:TEDCOcouldassume

theroleofanecosystemleaderandsetthestrategyanddirectionfortechnology-basedeconomicdevelopmentinMarylandoverall.ItcouldinfluencetheinteractionsanddirectionofthenumerousactorsthatformtheecosystemandmoreintentionallyconnectMarylandtonationalandglobalmarkets.

BecauseTEDCOneedstodetermineitsownvisionandrolewithintheecosystembeforedecidingwhichofthetrendsorpracticesdescribedinthisreportarerelevanttoit’sstrategy,eachmajorsegmentoftheoverallpipelinediscussedinthisreportisfollowednotbyrecommendations,butbyasetofimplicationsintheformof“if/then”statements.Acriticalassumptionofthisanalysisisthat,whicheverdirectionTEDCOtakeswithitsownprogramsandinvestments,itisalsoinapositiontoincentivizeandfundprogramscarriedoutbyotherorganizations.SomeprogrammodelsidentifiedhereliefarbeyondTEDCO’scurrentrole(asdefinedbystatelegislationandcurrentmandate),butareincludedbecausetheymattertothefirmsthatTEDCOservesandinfluencesandshouldthereforebefamiliartoTEDCO.3.TaskandResearchProcessBasedondirectionfromTEDCO,theresearchforthisreportproceededinthreestages,allorientedtowardsidentifyingthemesandprogrammodelsthatTEDCOcanconsiderasitengagesinstrategicplanningforimprovingcurrentprograms,developingnewprograms,andenhancingoverallorganizationaleffectiveness.

• Researchbroadlyforbestpractices:AsurveyofpublishedstudiesdescribingnewtrendsinotherTargetOrganizationswasconducted,includingnotjustothertechnology-basedeconomicdevelopmentorganizations(TBEDs),butalsostate,cityandregionaleconomicdevelopmentorganizations(EDOs);universities;federalresearchlaboratories;andcommercialenterprises.

• Conductin-depthinterviewswithtargetedorganizations:Themostsuccessfuland/orinnovativeTargetOrganizationswereinterviewedandcompellingexistingprogrammodels,aswellasthosethatwerenotyetpublishedinavailablereports,wereidentified.Theseincludebothestablishedpracticeswithprovenresultsaswellasexperimental,unprovenapproaches.Morethan30individualexecutivesandprojectleadersacross20statesandregionswereinterviewed.Alistofinterviewsisincludedattheendofthecasestudiessection.

• AssessfeasibilityforMaryland:Themostpromisingnewandusefulprogramsand

conceptswereidentifiedandthefeasibilityoftheirpotentialimplementationbyTEDCOwasassessed,takingintoconsiderationtheirnoveltyandcreativity,theireffectiveness,TEDCO’sorganizationalcharacteristics,andthecharacteristicsof

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Maryland’sentrepreneurialecosystem.InterviewswereconductedwithJohnsHopkins(TechVenturesandScience&TechnologyPark),BiohealthInnovation,andTEDCOstaffandboard,inordertobetterunderstandtheMarylandecosystem.

4.EcosystemandEconomicDevelopmentTrendsAcoreassumptionofthisreportisthateverystateorregionalentrepreneurialecosystemisdifferent,withvariationsbyindustry,accesstocapital,roleofgovernmentandotheranchorinstitutions,privatesectorengagementineconomicdevelopment,andmore.TounderstandhowaprogramfromanotherecosystemmightworkinMaryland,onemustassesshowtheseandothercharacteristicsdifferineachlocation.Becauseeachentrepreneurialecosystemisdifferentbothintermsofcultureandtechnology,andTEDCOcannotimportanotherorganization’sapproachentirely,itwillhavetoconsidermodularpiecesthatitcanadapttofittheMarylandecosystem.Marylandcan’tbecomeanotherregion,likeBostonorSiliconValley,andaccordingly,TEDCOcan’tdirectlyemulateoneoftheorganizationsthatservesthoseecosystems.Thescopeofthisprojectdidnotallowforanin-depthanalysisoftheMarylandecosystemorTEDCO’srolewithinit.Nevertheless,thissectionprovidessomecontextontheecosystem,inordertoestablishapointofreferenceforidentifyingwhichemergingtrendsandprogramswererelevanttoMarylandandTEDCO.Thiscontextshouldalsoallowreaderstodrawtheirownconclusionsaboutthefeasibilityofimplementingcertainpracticeshighlightedinthisreport.Maryland’sEntrepreneurialEcosystemItisnotablethatduringthisprojectitwasdifficulttodefinetherolesof,andrelationshipsbetween,themajoractorsinMaryland’sentrepreneurialecosystem.Itisclearthattherearecertaindominantplayersinthepublic(TEDCO)andacademic(JohnsHopkins,UMD)realms,butitwaschallengingtodiscerntheoverallroleoftheprivatesectorandtheconnectionsbetweenvariousorganizations.Whilethisinpartreflectstheinherentlymessyandfast-movingnatureofthetech-basedeconomy,itisalsotruethatotherregionsinterviewedforthisprojectwerebetterabletoexplainthebasiccontoursoftheirecosystems.ManyoftheorganizationsinMarylandseemedmoreinward-focused.Asoneintervieweenoted,Marylandhashistoricallyhadmanytacticiansbutfewstrategistsorvisionaries.WhileMaryland’ssupportsystemfortechcommercializationisrich(andincreasinglyso)comparedtomoststates,italsoarguablylacksoneormoreclearleadersandhasnotpositionedthestateasarecognizednationalleaderinthetechnologyandinnovationspace.Unliketheeconomicdevelopmentfieldoverall,inwhichtheMarylandDepartmentofCommerceistheclearleadagency,thetech-basedeconomyhasnoclearhierarchyorcenterofgravity.Thisisnotnecessarilyanegative,however,asinterviewswithnumerousorganizationsinMarylandsuggestthattheecosystemiscollaborativeandorganizationsgenerallyunderstandandrespectoneanother’smissionsandcontributions.Itwasalsosuggestedthatthelackofclearalignmentintheecosystemallowsthevariousorganizationstobemorenimbleandexperimental.However,therewasalsogeneralagreementthatsomeecosystemplayersviewthemselvesasbeingincompetitionwith

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othersandnoorganizationisgeneratingthenarrativeandconsistentlyandaggressivelytellingtheMarylandentrepreneurialandinnovationstory.Maryland’secosystemisperhapsmostclearlydifferentiatedfromothersbythedegreetowhichgovernmententities(includingNationalLabs)andacademicinstitutionsleadtheinnovationandcommercializationsystem,asopposedtotheprivatesector.Thestateranks2ndfornon-industry(primarilyfederalgovernment)investmentinR&D,ishometotwoofthenation’stop40researchuniversities(#1JohnsHopkinsand#31UniversityofMaryland),ranks4thforSBIR-STTRdollarsawardedtolocalfirms,andishometomajorfederalresearchagencies,suchasNIHandNIST.1Atthesametime,Marylandranksonly18thforindustryinvestmentinR&Dand27thinentrepreneurialactivity,signifyingthatthestateisnotadequatelyleveragingitsrichresearchassetsintonewbusinessformation.2Fortunately,overthepastfiveyearsorso,therehasbeenamarkeduptickindedicationandinvestmentintheinnovationandtechnologycommercializationecosystembyanumberofthesepublicentitiesandacademicinstitutions.Universitiesarebecomingmoreorganizedandinvestingmoreincommercialization,drivenprimarilybythedeclineofNIHfunding(TechVentures)andbyincreasingdemandfromstudentsandfaculty.TheUniversityofMarylandBioParkandScience&TechnologyParkatJohnsHopkinsarebecomingestablished.BioHealthInnovationwasstarted.TEDCOisgrowing,withnewinvestmentsfromthestateandtheabsorptionoftheMarylandVentureFund.Acceleratorsareproliferating,inkeepingwithnationaltrends.Andmoreplayersareenteringthegame,asevidencedbytheMarylandInstituteCollegeofArt’s(MICA)recentlyannouncedstartupchallenge.TEDCO’sRoleintheMarylandTechEcosystemTEDCO’srolerevolvesprimarilyaroundfundingspecificactivitiesinthecommercializationpipeline.Inthisrole,itisexpectedtomakegoodinvestmentsthatprovideareturnwhilealsoachievingeconomicdevelopmentoutcomesforthestate.Whileitoffersothergeneralentrepreneurialsupportprogramsandresources,theseareprincipallydesignedtoservecompaniesthathavereceivedTEDCOfunding,asopposedtoservingtheecosystemoverall.TEDCO’sactivitiesareconstrainedbystatelegislation,butitssignificantfinancialresourcesandabilitytoinvestincompaniesgivetheorganizationadegreeofpowerandcredibilityintheecosystemasawhole.TEDCOcanshapestateTBEDstrategyeitherbybringingmoneydirectlyorexertinginfluenceviaincentives(forexample,TEDCOcurrentlyfundsincubatorstosomeextentaswellasstudiesthatjustifycertainnewactivitiesinincubators).Butaswillbediscussedlater,itisnotclearwhetherTEDCOiscurrentlyfullyleveragingitspotentialinfluencethroughouttheecosystem.DisruptioninEconomicDevelopmentAsTEDCOdecideswhetherorhowitshouldexpanditsscope,itshouldtakeintoaccountthefactthatstateandregionaleconomicdevelopmentagenciesarebeginningtoexpand

1ITIFStateNewEconomyIndex2014;NationalScienceFoundation;U.S.SmallBusinessAdministration2ITIFStateNewEconomyIndex2014

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intoterritorythathaspreviouslybeenthesoleprovinceofTBEDorganizations.WithtraditionalbusinessattractionvolumedownsignificantlyandEDOsfacingpressuretodiversify,morearebeginningtoplayastrongerroleininitiativesrelatedtonewtopics,suchasinnovationandglobaltradeandinvestment.Thereis,inshort,anongoingconvergencebetweentraditionalandtechnology-basedformsofeconomicdevelopment.ThismeansthatevenifTEDCOdecidesthatthebeststrategyistodoubledownonitscurrentpipeline,itislikelythatothereconomicdevelopmentactorswillincreasinglyoperateinthisspace,creatingpotentialconfusion.Therefore,TEDCOmayhavereasontoproactivelydefinehowitandotherEDOscanmosteffectivelyandcooperativelyoperatethroughoutthepipeline.5.SummaryofThemesandProfilesAkeyobjectiveofthisreportistoclearlyarticulatethemesthatrepresentareasofopportunitybasedonTEDCO’sinterestsandcapacity,nottodeliverlonglistsofexampleprogramsandtactics.Theresearchandinterviewsconductedforthisreportyieldedasetof20highlyrelevantprogrammodelsthataredescribedindetailed2-3pageprofiles.Theseprofilesareorganizedwithinninekeythemesthatfallintothefourcategoriesofthepipelinediscussedpreviously.Thebelowchartillustratesthewayinwhichthecoreelementsofthisreport–pipelinephases,themes,andprofiles–areorganized:

Theanalysisofthesephases(pre-pipeline,currentpipeline,andpost-pipeline),themes(topicsinblackabove),andprogrammodelsisdividedintotworeportsections:1)thisreportsection,whichprovidesbriefsummariesofeachofthe20programmodelsandtheirimplicationsforMarylandand/orTEDCO;and2)acompanionreportsection,whichprovidesmorein-depthprofilesofeachofthe20programmodels,plussidebarsandotherexamples.Thesidebarsofferbriefoverviewswithinadditionalthemesofrelevantorganizationsorprogramsthatdidnotwarrantfullprofiles,butmaybeofinterest.TheexamplespointtootherresearchedprogramsthatTEDCOmaywanttoexamineonitsown.

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Theremainderofthisreportsectionservesasasummaryofthethemesandprogrammodelsineachphaseandcontainsthefollowing:

• Rationaleforengagingineachphase(i.e.,whypre-pipelineeffortsmatter)• Rationaleforeachthemewithinthephases(i.e.,whyinclusionmatters)• One-paragraphoverviewdescriptionsofthe20profiledprogrammodels• Listsofsidebartopics• ImplicationsforMarylandand/orTEDCOintheformof“if/then”statements

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LEADERSHIPANDVISIONLookingoutwardtochampionanddrivetheentireecosystem,withinthestateandbeyond.Rationaleforthetheme:WhilethetechcommercializationframeworkhadinitiallybeendevisedtocovermoretacticalphasesrelatedtoTEDCO’scurrentpipeline,theinterviewprocessrevealedanother,over-archingdimensionthatdemandedconsideration–leadershipandvision.ThoseinterviewedbothwithinMarylandandinotherstatesandregionsstressedtheimportanceofstrongleadership,notonlytodriveindividualorganizations,butalsotheentireecosystem.Theentrepreneurialecosystemdoesnottendtothrivewithatop-downorbureaucraticculture(ittendstofunctionbetterwithinamorefluid,organicnetwork);however,itdoesneedoneormoreneutral,thirdpartyorganizationsthatarewell-connectedandcanactasconveningandcoordinatingagentsthatsetbroadervisionandstrategy.Ininterviews,mostplacespointedtotheprivatesectorastheinitialcatalystfornew,transformativeinitiatives,butalsostressedthatgovernmentcollaborationandfollow-oninvestmentwasequallyimportant.Italsorequiresaleader,orgroupofleaders,thatwillstepbeyondtheirownorganizationsandconsistentlychampiontheoverallcause.Themostimportantattributesforecosystemleadersbasedoninterviewsareadedicationtogoodandconsistentresearchrelatedtotheecosystem(notjusttheperformanceoftheirownorganizations),theabilitytodevelopanddeliveraconsistentnarrativeorstoryforthestateorregion,andthecapabilitytobea‘dotconnector’thatunifiesandcoordinatesthekeyplayers.SanDiego–NetworkedLeadershipandCONNECTThestoryofhowSanDiegorosefromarelativelyunknownplayerintheR&Dspace50yearsago,toatopU.S.metrotoday,isoneofnecessity,strategicinvestmentsandinitiatives,anewapproachtoresearch,ahighlycollaborativeculture,andleadershipdedicatedtocreatingatrulyentrepreneurialecosystem.Keytotheregion’ssuccesswereindividualleaders,notablyDwayneRoth,who,startingin2004,becamenotonlytheleaderforCONNECT,butthevisibleleaderand“dotconnector”ofSanDiego’sinnovationcommunity.TheSanDiegoregionisnowoneofthenation’spremierR&Dandinnovationhubs,anchoredbymajorresearchinstitutes,includingUCSanDiego,ScrippsResearchInstitute,SalkInstituteforBiologicalStudies,Sanford-BurnhamMedicalResearchInstitute,WestHealthInstitute,andJ.CraigVenterInstitute.ThisdenseconcentrationofR&Dhasledtohundredsofnewcompaniesandestablishedclustersinlifesciences,communications,software,andcleantech.Indiana–BioCrossroadsandtheCentralIndianaCorporatePartnershipBioCrossroadsservesastheclearleaderandcatalystforIndiana’slifesciencecommunity.Itwasformedin2002aroundavisiontodomorewiththestate’sadmirablelifesciencescorporateandacademicassets(whichincludesEliLilly,WellPoint,CookMedical,andRoche)andiscreditedwithdrivingIndiana’semergenceasanationallyknownlifescienceshub,includingraisingover$250millionforgrantfundsandcapitalinvestmentstostartandsupportlifesciencesopportunities,organizingfourventureandseedfunds,andlaunchingnewenterprises.DavidJohnson,whobecameCEOin2005,notonlyoverseesday-to-daymanagementoftheorganization,butalsohasbecomearecognizedlocaland

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nationalleaderinthefieldoflifesciencesandinprivatesectorinitiatives.HecreditsresearchasbeingthefoundationofallthatBioCrossroadshasaccomplishedduringhistenure.BioCrossroadsisoneofsixeconomicdevelopmentinitiativessponsoredbytheCentralIndianaCorporatePartnership,aCEOdrivenorganizationformedin1999(withmajorsupportfromthe$13billionLillyEndowment)anddedicatedtotheregion’sprosperityandgrowth.Milwaukee–WaterCouncil TheWaterCouncilaimstoestablishtheMilwaukeeregionastheworldhubforwaterresearch,economicdevelopment,andeducation.Ithasgonealongwaytowardsachievingthisstatusinthefewyearssinceitsofficialformationin2009.Theclusterconsistsofover200watertechnologiescompaniescoveringtheentirespectrumofthebusinesspipeline.IthasaphysicalpresenceintheGlobalWaterCenter,a98,000squarefootresearchandacceleratorfacilitycompletedin2013andislocatedintherecentlyestablishedMilwaukeeWaterTechnologiesDistrictneardowntown.ItisfurthersupportedbytheUniversityofWisconsin-Milwaukee’sschoolofFreshwaterSciences,createdin2010.Thiseffortwasinitiallycatalyzedbytheprivatesectorandisdrivenbyintensecollaborationandsignificantlevelsofcommitmentamongbusiness,academic,andpublicsectoragents.TheWaterCouncil’sbudgetis$3.5million,sourcedfromleasingattheGlobalWaterCenter,grants,membership,andfees.Minnesota–MedicalAlleyAssociationClusterResearchTheMedicalAlleyAssociation,theindustrygroupforMinnesota’shealthtechnologycluster,hascreatedaleanbuteffectiveresearchoperationoverthepastseveralyearsthatsupportstheassociation’spublicpolicyefforts,provideslocalfirmswithactionableindustryintelligence(aroundsuchtopicsassupplychains,productapprovalsandinvestmenttrends),andpromotesMinnesota’sclusterassetsandspecializedexpertisenationallyandglobally.Injustoneyearandwithtwostaff,theMedicalAlleyresearchteamreleasedmorethan20reportsonthecluster.MedicalAlley’sresearchexpertisehasallowedittoformeffectivepartnershipswithothereconomicdevelopmentorganizations.Austin–DellMedicalSchoolInnovationZoneTheInnovationZone,a14-acresiteindowntownAustincenteredontheUniversityofTexas’snewDellMedicalSchoolandteachinghospital,representsbothanewmodelforcollaborationbetweenpublic,private,andacademicinstitutionsandagoodexampleofthepotentiallinkagesbetweenuniversitytechnologytransferandcommunityinclusion.TheInnovationZoneaimstohelpbridgeAustin’stechandstart-upcommunitywithanewmodelforhealthcaredelivery.NotonlyistheDellMedicalSchoolthefirstnewmedicalschoolbuiltalongsideatieroneresearchuniversityinthecountryinthelastfiftyyears,itisalsothefirsttofocusallitsclinical,teaching,andresearchassetsaroundnewclinicalcaremodelsthatimprovetheoverallqualityandcostofcare—notjusttheuseofnewtechnologies.Inparticular,theschoolhastheexplicitgoalofpursuingcomprehensivevalue-basedcare(reimbursementsbasedonpatientoutcomes,notsimplytheamountofproceduresdone).UThaspartneredwithanumberofcommunityorganizations,createdresearchareas,andattractedfacultyaimedatachievingthismission.

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Sidebars:LeadershipandVision(seecasestudyprofilessection)• VirginiaCommonwealthCenterforAdvancedManufacturing(CCAM)• SanAntonioCyberClusterInitiative• JumpstartEcosystemBuilding(seepre-pipelinecasestudyprofileonFocusFund)

Implications:LeadershipandVision

• IfMarylandwantstohaveaneffectiveandcohesiveentrepreneurialecosystem,thenaleaderorgroupofleadersneedstopulltogetheraunifiedeffortacrosstheecosystemandstrengthennetworksbetweenorganizations.

• IfMarylandwantstobewidelyrecognized(internallyandexternally)asanationallyrelevantentrepreneurialecosystem,thenitneedstoproduceconsistentresearchthattellstheMarylandstoryandconfirmsitsstatusasaninnovationpowerhouse.

• IfMarylandwantstocompetewithotherecosystemsthatareledbytheprivatesector,thenitwillneedtofigureouthowtobetterleveragetheprivatesectorinMarylandorensurethatgovernmentandlargeinstitutionsareableandwillingtofillthecatalyticrolesthattheprivatesectordoeselsewhere.

• IfTEDCOwantstoassumealeadershiproleanddrivethesuccessofMaryland’sentrepreneurialecosystem,thenitwillneedtoshiftfromaprimarilyinwardfocusonitsowneffectivenesstoincludeanequalandoutwardfocusonthesuccessoftheentireecosystem.

PHASE1:PRE-PIPELINE Fosteringacultureofentrepreneurshipandinclusiveness.Rationaleforthephase:Thepre-pipelinephasereferstoeffortstogrowandbroadentheinnovativecapacityoftheMarylandeconomy.Inotherwords,ratherthantakingtheamountofinnovationasagivenandworkingtomaximizethecommercialsuccessofthoseinnovations,TEDCO(oritspartners)couldactivelyworktofosteramoreinnovativecultureacrosscurrentlyoverlookedpopulationsandindustries.Theobjectivewouldbetoincreasethediversityofpeopleandcompaniesthatareinnovatinginthefirstplace,therebyorganicallygrowingthesizeoftheecosystemovertime.Investinginpre-pipelineprogramsrecognizesthegrowingevidencethatminoritiesandwomenaresignificantlyunder-representedinhigh-techoccupations,andthatmanyhighpotentialstudentsinMarylandschoolsanduniversitiesneverconsidertheideaofstartingabusinessorstudyingtechnicalsubjects.Italsorecognizesthatrapidtechnologicalinnovationisreshapingmorethantraditional“tech”industries,includingmanufacturingandconsumerservices.3

3MarkMuro,KellyKline,andBruceKatz.“SoftwareEatsManufacturing(andManufacturingGains).”Brookings(2016).

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Theme:InclusiveEntrepreneurship Rationaleforthetheme:Amidbroadernationalconversationsaboutwealthinequality,particularattentionhasbeenpaidlatelytothestrikinglackofracialandgenderinclusionintechnology-basedindustries–aparticularlytroublingtrendgiventhatthesearesomeofthefastest-growingandhighest-payingindustriesandoccupations.ItisalsoatrendwithparticularrelevanceforMaryland,whereasof2014over47percentofthepopulationisminority,the7thhighestminorityshareamongU.S.states.Meanwhile,lessthan1percentofangelandventurecapitalfundingisinvestedinminority-ownedbusiness,andjust3percentisinvestedinwomen-ownedcompanies.Minority-andwomen-ownedcompaniesare22percentand19percentlesslikely,respectively,toraiseventurecapitalthanthoserunbywhitemales.4Further,minorityentrepreneursarelesslikelytobeabletoraisemoneyfromfamily–thenetworthforthemedianwhiteAmericanfamilyis$111,000,comparedto$8,300foraLatinofamilyand$7,100forablackfamily.5Theurgencyofthischallengeisperhapsbesthighlightedbytheactionthatcompaniesthemselveshavetaken.Inadditiontosetting(andexceeding)aninternalgoalofincreasingitsminorityhirerateto40%in2015,Intelcreateda$125milliondiversityfundtoinvestinstartupsrunbywomenandminorities.Since2011,ComcastCapitalhasruna“CatalystFund”thatmakesseedandSeriesAinvestmentsintechcompaniesfoundedbyminorityentrepreneurs.Despitethesegrowingprivatesectorefforts,thereclearlyremainsaroleforpublicandnonprofitentitiestoplayinaddressinggapsleftbythemarket.Portland–StartupPDXChallengeandInclusiveStartupFundTheStartupPDXChallenge,runbythecityofPortland’seconomicdevelopmentagencyandtargetedatminorityentrepreneurs,awardssixearly-stagestartupsaone-yearplatformtosetthemupforlaterinvestment.Eachcompanyreceivesupto$25,000intheformoftwo-yearlow-interestloansorconvertibledebt,freeofficespaceinacity-ownedbuilding,in-kindbusinessservices(HR,accounting,marketing),andmembershipstorelevantindustryorganizations.TheInclusiveStartupFundisanewventurefundthatisexclusivelytargetedatminorityentrepreneurs,whichhasbeencapitalizedwith$1.25millionfrompublicsourcestobematchedwith$1.75millioninprivatefunding.Atlanta–OpportunityHubandTechSquareLabsOpportunityHubisaco-workingspaceandsetoftrainingresources,embeddedwithinalargerincubatorinAtlanta,thatoperatesasa“platformtostart,accelerate,incubate,andfund”technologycompanieswithfoundersfromunder-representedpopulations.OpportunityHuboperatesearlyinthepipeline,helpingtobuildtalentandconnectionstohelpminoritiesaccessthetechfirmsorstarttheirown.Keyprogramsincludeapre-accelerator,codingschool,andayearlongintensiveprogrammingandentrepreneurshiptrainingprogramforinner-cityyouth.Acrossallofitsprograms,OpportunityHub

4JohnPagliaandMaretnoHarjoto.“TheEffectsofPrivateEquityandVentureCapitalonSalesandEmploymentGrowthinSmallandMediumSizedBusinesses.”JournalofBankingandFinance47(2014).5LauraSullivanetal.“TheRacialWealthGap:WhyPolicyMatters.”InstituteforAssets&SocialPolicyandDemos.(2015).

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maintainsaconsistentfocusonbringingminorityentrepreneursintomainstreamspacestointeractwithfundersandcorporations.Ohio–ThirdFrontierandJumpstartInclusionandDiversityTechFundToagreaterdegreethanmosttech-basedeconomicdevelopmentorganizations,Jumpstarthasmadeinclusiveentrepreneurshipacentralelementofitssupportforstartupfirms.Themostrecentmanifestationofthisisa$10millionseedfundcalledtheFocusFund.Launchedin2016withtheencouragementandfinancialsupportofthestateaswellasmatchingfundsfromtheCaseFoundation,theFocusFundwillinvestexclusivelyinwomenandminority-ledtechstartups.ItwillfundbothOhio-basedentrepreneursaswellasstartupsfromacrosstheU.S.thathaveabusinessrelationshipwithinOhioandarewillingtorelocate.ThiseffortstemsfromJumpstart’soutwardorientationandmissionofnotonlymentoringandfundingstartups,butalsobuildingpublic-private-institutionalecosystems.Sidebars:InclusiveEntrepreneurship(seecasestudyprofilessection)

• St.Louis–Launchcode• Charlotte–CityStartupLabs

Theme:Pre-accelerators Rationaleforthetheme:InaFebruary2016report,SSTIlabeledpre-acceleratorsa“hotnewtrend”,notingthatanumberofuniversitieshadlaunchedsuchprogramsin2015and2016.Pre-accelerators,asthenamesuggests,aredesignedtoproactivelybuildpathwaysintoaccelerators.Whileavarietyofmodelsareemerging,theygenerallyaimtorespondtotwogapsnotaddressedbytraditionalaccelerators.First,theremaybeasignificantpopulationofpotentialinnovatorsthataren’tawareofthemechanicsofbecominganentrepreneur(especiallyoncollegecampuses),orthatarecurrentlyemployedandunwillingtodiveintoafullacceleratorwithoutinitialvalidationthattheirproductisviable.Second,somearelinkeddirectlytospecificacceleratorsandareusedasameansofensuringthatentrepreneursarefullypreparedtomaximizetheacceleratorexperiencefromtheoutset,ortoprovidealessintensiveprogramtofirmsthatdidnotmakeitintooversubscribedacceleratorcohorts.Intermsofstructure,manyareverysimilartotraditionalaccelerators,butwithafewkeydifferences:theycombineashorterversionoftraditionalacceleratorcurriculumwithaheavieremphasisonbusinessfundamentals,andtheytraditionallydon’ttakeequity,whichcreatesaculturemoreopentoexperimentationthroughfailure.Sidebars:Pre-accelerator(seecasestudyprofilessection)

• Pennsylvania–TechCelerator@StateCollege• Chicago–NorthwesternUniversity’sTheGarage• London–FastForwardPre-Accelerator

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Theme:STEMOutreachtoK-12Rationaleforthetheme:VirtuallyeveryregionoftheU.S.isstrugglingwiththechallengeofproducingaworkforcewiththescience,technology,engineering,andmath(STEM)skillsthatemployers–particularlyintech-basedindustries–demand.A2014analysisbyBrookingsfoundthatintheBaltimoremetroarea,jobopeningsrequiringSTEMskillstookover40daystofillonaverage,despitethefactthattheaveragesalaryofthesejobswascloseto$60,000.Bythatmeasure,theregionisamongthetop20%nationallyintermsofthedifficultythatfirmsfaceinfindingSTEMtalent.6SomeregionsandorganizationsarerespondingtothesechallengesbyfocusingondevelopingSTEMskillsandacultureofinnovationattheK-12level.Theseeffortsrecognizethat,despitethegrowingpopularityofcollegeentrepreneurshipprograms,buildingaSTEM-orientedworkforcelargeenoughtomeetemployerdemandisalong-termendeavor.TheseK-12programsalsoalignwiththefactthat,nationally,50%ofjobsthatrequireSTEMskillsdonotrequireabachelor’sdegree.Sidebars:STEMOutreachtoK-12(seecasestudyprofilessection)

• SanDiego–QualcommThinkabitLab• SouthCarolina–CU-ICARoutreach• Philadelphia–FirsthandProgramatTheScienceCenter

Implications:Pre-PipelinePhase

• IfMarylandwantstostrengthenitsentrepreneurialcultureandensureaconsistentanddiversestreamofnewentrepreneursandcompanies,thenitwillneedtomoreintentionallycultivatethemarketbeforefirmsareevenformed.

• IfMarylandwantstodeveloptheuntappedpotentialofwomenanditslargeandgrowingminoritypopulations,thenitneedstomakeintentionalandsustainedeffortstoreachout,providesupport,andconnecttheseentrepreneursintotheecosystem.

• IfTEDCOwantstoservethispre-pipelinerole,itmayhavetoconsidereitherexpandingitsdefinitionofwhatconstitutesatechcompanyormovingbeyonditsexclusivefocusontechfirms(asmanystartupsarein,forexample,foodandapparelindustries).

PHASE2:CURRENTPIPELINEProvidingintensesupportandseedfundingforestablishedearlystagetechfirms,frombasicresearchthroughscaleup.Rationaleforthephase:TEDCOwascreatedbytheMarylandStateLegislaturein1998tofacilitatethetransferandcommercializationoftechnologyfromMaryland’sresearchuniversitiesandfederallabsintothemarketplaceandtoassistinthecreationandgrowthoftechnology-basedbusinessesinallregionsofthestate.Itisintenselyfocusedonprovidingfundingandrelatedsupporttotech-basedstartupsinthephasefrombasicresearchtoearlyscaleup.6JonathanRothwell.“StillSearching:JobVacanciesandSTEMSkills.”Brookings(2014).

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Accordingtoa2015economicimpactreportfromBattelle,aswellasanextensivesurveyoffirmsandpartnersinthestate’sentrepreneurialecosystembyFireDriveConsultingin2016,TEDCOhasperformedthisfunctionwellandplaysakeyroleinearly-stageventuredevelopment.TheBattellereportconfirmsthatTEDCO’seffortsaregeneratingastrongandgrowingeconomicimpactandhaveproventobeaverygoodinvestmentforMaryland,withtheeconomiccontributionofTEDCO’sfivecoreprogramstotalingover$1billioninand4,358jobsin2015.TheFireDrivestudyconfirmsthatTEDCOisrespectedanddeemedcriticalbythestartupcommunityforitsfundingandrelatedprograms.DemandforTEDCO’sexistingsetofprogramsandservicescontinuestogrow;however,thereisstrongevidencethatmuchofthisdemandgoesunmet,demonstratedbyanacceptancelevelforcoreprogramsthatislowerthanmostpreviousyears.Further,thereareopportunitiesforTEDCOtoengageinnewprogramsduringthisphaserelatedtoaccelerators,labsanduniversities.TheMarylandEconomicDevelopmentandBusinessClimateCommission,inits2015report,recommendedexpandingTEDCO’sfundingtomeetgrowingdemand.Theme:LeveragingNationalLaboratoriesforRegionalEconomicGrowthRationaleforthetheme:Thefederalgovernmentinvestsmorethantensofbillionsofdollarsannuallyinfederalresearchcentersandlaboratorieslocatedinstatesthroughoutthecountry.Theselabshousesomeoftheworld’smostcuttingedgetechnologiesandexperts.Yetfortoomanystates,nationallabsexistinisolationandarenotcontributingtotheregionaleconomy.Therealityisthesenationallabs—andthemissionagencieslike,DOD,DOE,andNIH—werecreatedattheendofWorldWarIIwhentheU.S.governmentrepresentedthelion’sshareoftheglobalR&Doutput.Insuchanenvironment,labscouldworkinisolationwithlittleconcerntoco-locationwithfirmsanduniversitiesbecauselabsdidn’tneedsupporttoresearchandcreaterelevantproductsandinnovationwasseenasamethodtoachievethecountry’smilitarygoalsnoteconomicpriorities.Today,statesareeconomicecosystemswiththeirownpublicandprivateanchorinstitutions.Inordertocreatesynergiesbetweennationallabsandstateinnovationecosystems,expliciteffortsareneededtoconnectstatesandlabs.Threebarriersconsistentlystandoutfornationallabs:theydonotworkwellwithsmallfirms,arenottypicallygeographicallylocatedinhigh-growthmetropolitanareas,anddonothaveastrongregionalfocus.NewMexico–NMSBANationalLabVouchersWithtwoofthelargestnationallaboratorieslocatedinNewMexico—SandiaNationalLaboratoryandLosAlamosNationalLaboratory—thestatehasmoregovernmentsupportedR&D(giventhestate’ssize)thananyother.Inordertomakethelabsmorerelevanttosmallbusinesses,in2000thestatepartneredwithitstwonationallabstocreatetheNewMexicoSmallBusinessAssistanceProgram.Theprogramallocatessmallbusinesseswith$10,000(forfirmsintheAlbuquerquemetroarea)and$20,000(forfirmsoutsidethemetroarea)voucherstoaccesstechnicalresourcesatthetwolabs.Together,theprogram’sbudgetis$4.8million—$2.4millionforeachlab,whichcomesintheformofastatetaxcredit.Thelabsadministertheirownprograms.Asof2015,theprogramhasassisted2,500smallbusinessestoaccesstechnicalassistanceatLosAlamosandSandia.

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Tennessee–OakRidgeNationalLabRevVVouchersRevVisavoucherprogramthatlinkssmall-andmedium-sizedmanufacturersinTennesseewithOakRidgeNationalLaboratory(ORNL)locatedinEastTennessee.ThroughtheprogramfirmsareabletoaccesstechnicalassistancefromORNLscientistsonashort-termbasis.Vouchersrangefrom$10,000to$50,000andpayforresearchtimeandequipmentuse.Theprogram,firstinitiatedin2015throughapartnershipbetweenGovernorHaslamandORNL,hasanannualbudgetof$2.5million.Tobeeligible,firmsmusthaveatleast10employees,beamanufacturer,andbeabletoarticulatejobcreation,energysavings,orothereconomicbenefitstothestateofTennessee.Tennessee–OakRidgeNationalLabMicrolabTheManufacturingDemonstrationFacility(MDF)atOakRidgeNationalLabistheDepartmentofEnergy’sfirstdemonstrationfacilitywhichaimstobetterleveragethelab’sresearchcapacitytoassisttheprivatesector.OneofthemajorfeaturesoftheMDFisitslocation,whichisnotonthehighlysecuredlab’shomecampusbutinamixedpublic-privateresearchparknearKnoxville,TN.Beinglocated“outsidethefence”,theMDFservesasORNL’sstorefrontforprivatesectorcollaboration.Thefacilityfocusesonadditivemanufacturing,batterytechnologies,andcarbonfiberandutilizestheequipmentandresearchexpertiseofORNLtosupportregionalbusinesses.AccordingtoCraigBlue,DirectorofMDF’sAdvancedManufacturingCenter,“beingoutsideofORNL’smaincampusandamissiontosupporttheprivatesector,allowsMDFtobeamuchstrongerplayerintheregionaleconomythanthelabevercouldbeonitsown.”California–CalChargeTechAssessment&AccelerationCalChargeisapublic-privateindustryassociationinCaliforniadevelopedthroughapartnershipbetweenthestateofCaliforniaandLawrenceBerkeleyNationalLaboratorytaskedwithsupportingtechnologydevelopmentandthecompetitivenessoftheCaliforniabatteryindustry.Withthatmission,in2015,CalChargedevelopedaone-size-fits-allcontract(calledaCRADA)withBerkeleyNationalLabthatcanbeappliedtoanyCalChargememberfirm.Doingsoallowsanymembercompanytosurpassthe“termsandconditions”legallanguagetobeginworkingwithresearchersatBerkeleylab.Theblanketagreementhasreducedthetimeittakestosignaresearchcontractwiththelabfromanaverageof100daystoseveralweeks.Sidebar:IntellectualPropertyAccess(seecasestudyprofilessection)

• Minnesota–UniversityofMinnesotaMNIPprogram

Theme:TranslationalResearchandUniversity-DrivenEntrepreneurshipRationaleforthetheme:Toooftentechnologytransferfromuniversitiescomesexclusivelyintheformofinventiondisclosures,patents,andlicensingdeals.Creatingandsupportingyoungcompaniesthatdevelopfromacademicresearch,however,representsanimportanteconomicbenefitofuniversities.In2016alone,over650startupscameoutofuniversitiesnationwide.Butfosteringstartupsismoredifficultthantraditionaltechnologytransferandrequiresstrongpartnershipswithintermediariesoutsidetheuniversitythatcanhelpresearch

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entrepreneursaccesscapital,connectwithotherfirmsandmentors,andlocatecustomers.Universitiescanhelpfacilitatetheseactivities,buttheycannotdoitalone.Researchstartupsarebestpositionedtosucceedwhensupportedbydenseclustersofco-locatedintermediariesthatworkcloselywithuniversityresearch,usuallywithinurbansettings.Chicago–InnovationExchangeTheChicagoInnovationExchange(CIE)istheUniversityofChicago’scomplexthatsupportsresearchersandentrepreneurstranslatescientificandacademicresearchintonewtechnologiesandbusinesses.ThegoalofCIEistosupportfirmsinthehardscienceswithinthefirstyearoflife.WhiletheCIEisrunbytheUniversityofChicago,itbringstogetheravarietyofpublicandprivateinstitutionsincludingFermiandArgonnenationallaboratories,theUniversityofIllinois,theMarineBiologyLab,andanumberofprivatefirms.Theon-campusincubatorhosts10-20start-upsatatimebutalsoincludes1,900memberswhoutilizetheco-workingspace.CIEcurrentlyoccupiesthreebuildingsneartheUniversityofChicago’sHydeParkcampus.Pittsburgh–LifeScienceGreenhouseThePittsburghLifeScienceGreenhouse(PLSG)isoneofthreestate-sponsoredinstitutionsinPennsylvania(theothersareinHarrisburgandPhiladelphia)thatsupportearly-stagelifescienceandhealthITcompanieswithseedcapitalandmentorship.PLSGservesasanintermediarybetweenacademicresearchatbothCarnegieMellonUniversityandtheUniversityofPittsburghandstartupsthatfollowfromresearch.Tosupportthecreationanddevelopmentofstartups,theorganizationnotonlyfundsearlystagecompaniesbutconnectsacademicentrepreneurswithprofessionalCEOswiththebusinessacumentobringtechnologytomarket.Sinceitsinception,PLSGhasinvestedinover50lifesciencescompaniesandhasattractedmorethan$300millioninfollow-onfunding.Sidebar:TranslationalResearchandUniversity-DrivenEntrepreneurship(seecasestudyprofilessection)

• Minnesota–UniversityofMinnesotaEntrepreneurialLeaveProgramTheme:AcceleratorsRationaleforthetheme:Acceleratorsareinvogue.It’sestimatedthatthereare3,000activeacceleratorsinternationallyandmanytimesasmanyco-workingspaces.7Yetfewstatesactuallyunderstandtheeconomicimpactoftheacceleratorswithintheirborders,orhowtomakethemmoreimpactful.Researchonacceleratorssuggeststhatthetraditionalacceleratormodelworksbestforsoftwarestartupsincitieswithanabundanceofventurecapital.Unlesstailoredtothelocalmarket,traditionalacceleratorshavelimitedeffectivenessforotherindustries.Forexample,MITresearchersDanielFedherandYaelHochbergfindthatcitiesthathaveacceleratorsseehigherinvestmentsinsoftwarestartupsthanthosethatdo

7DanielFehderandYaelHochberg,“AcceleratorsandtheRegionalSupplyofVentureCapitalInvestments,”NationalBureauofEconomicResearch(2014).

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not,butthepresenceofacceleratorshasnoimpactonfundingofbiotechnologystartups.8Evenincitiesandstateswithstrongsoftwareclusterstheyoftendonothavethefullecosystemsofmajortechhubs—includingaccesstoventurecapital,professionalmanagementtalent,ortech-centricacademicinstitutions.InorderforacceleratorstoworkinplacesoutsideofmarketssuchasBostonandSiliconValley,theyshouldbetailoredtoconnectentrepreneursinavarietyofindustrieswithsuppliers,customers,andinvestors.Providence–BetaSpringNon-VentureBasedAcceleratorBetaSpringisatoprankedacceleratorinProvidence,RI,andin2015createdtheRevUpprogram,whichisthecountry’sfirst“revenue-first”acceleratorprogram.Likemostaccelerators,BetaSpringacceptsquarterlycohortsofstartupfirms(usuallyadozeneachyear)toparticipateinanintensethree-monthprogramaimedatbuildingthesebusinessesandhelpingthefoundersbothaccesscapitalandmentors.However,unlikeotheraccelerators,BetaSpringdoesnottakeanequityshareinthefirms.Instead,inexchangeforparticipatingintheRevUpprogram,BetaSpringsignsroyaltycontractsbasedonthecompany’sgrowthandfirmspayBetaSpringroughly4-8percentofrevenuesfor36months.Sidebar:Accelerator(seecasestudyprofilessection)

• DesMoines–GlobalInsuranceAcceleratorImplications:CurrentPipelinePhase

• IfTEDCOisturningawayfirmsthatqualifyforandcouldbenefitfromassistance,thenitshouldconsidertryingtomeetdemandandextendthereachofitscurrentprogramstomorecompanies.

• IfTEDCObelievesthatitisalreadyhighlyeffectiveatwhatitdoes,butisawarethattherearespecificareastoimprove,thenitshouldconsiderintensifyingeffortsinitscurrentspace.

• IfTEDCOwantstoleverageMaryland’slabsandnationallyrelevantresearchinstitutesasmuchaspossible,thenitshouldbeattheforefrontofcreatingandreplicatingnewwaystocommercializeresearchfromthem.

• IfTEDCOwantstoensurethesuccessofMaryland’sincubatorsandaccelerators,itshouldworktoensurethattheymeettheneedsofspecificclustersandexistwhereentrepreneurs,researchers,andinnovativecompanieswanttobe.

PHASE3:POST-PIPELINEProvidingongoingsupportandconnectingfromscaleupintothemiddlemarketstage.Rationaleforthephase:Thepost-pipelinephasereferstoeffortstoprovideongoingassistancetotechnology-basedcompaniesaftertheyhavereceivedSeriesAfundingandastheygrowtobecomemiddle-marketfirms.Ratherthanassumingthatsuccessfulstartupswillbeabletoseamlesslynavigatetheprivatesectorandtheeconomicdevelopmentsystemandthriveastheyexpandnationallyandglobally,TEDCOcouldprovideongoingassistanceand/ormore8Ibid.

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proactivelycoordinatethe“handoff”ofstartupstootherfundersandeconomicdevelopmentactors.Investinginpost-pipelineprogramsrecognizesthefactthatthecreationofstartupsonlymeetsTEDCO’sstatedgoalof“creatinghighpayingjobsandexpandingthetaxbase”ifthosestartupsactuallygoontosurviveandgrow.ResearchbyGaryKunklerevealshowrarethisisforfirms:from2005to2010,only12%ofU.S.businessgrewatall(creatingonaverageonejobeach),andjust1%offirmscreated72%ofallnetnewjobs(creatinganaverage17jobseach).WhilethefirmsthatTEDCOfundspossessuniquetechnologiesandarethereforelikelytobesomewhatover-representedinthe“sustainedgrowth”category,itremainsthecasethatthevastmajorityofstartupsencountersignificantchallengesastheygrow–orfailtogrowatall.Andthechallengesdonotrecedeoncefirmsmovepastthestartupphase.Manyestablishedtechnology-basedfirmsstrugglewiththeongoingdemandsofinnovationorexpansionfromnationaltoglobalmarkets.Economicdevelopmentorganizationsarewellsuitedtoaddressmanyofthesechallenges,astheexamplesinthissectiondemonstrate.Toooften,however,growingtechnology-basedfirmsfallintogapscreatedbysiloedorganizationalstructures,misalignedincentives,oralackoftargetedresourcesandprograms.Theme:ExportsandGlobalEngagementRationaleforthetheme:Innovationisawell-establisheddriverofexportactivity.Inacyclicalpattern,exportscaninturncontributetoafirm’sinnovationcapacitybyexposingittotechnologicalexpertisethatisnotavailableinthelocalmarket.9Furthermore,thesebenefitsarenotonlyavailabletothemajor,establishedmultinationalfirmsthatarethemostactiveexporters.Inscience-basedindustries,theageandsizeoffirmshaslittlebearingontheirexportintensity.10Smallfirmsinbothgoodsandservicesindustriesareincreasinglyabletoaccessglobalmarketsthroughanarrayofdigitalplatforms.Inasurveydoneincollaborationwith1776,theglobalincubator,McKinseyGlobalInstitutefoundthat86%ofstartupshadengagedinsomekindofcross-borderactivity.11In1977,84%ofU.S.exportscamefromlargemultinationalfirms,butthatsharehadfallento50%by2013.ExportsarepoisedtobecomeincreasinglycrucialtothecompetitivenessofU.S.firmsincomingyears,as81percentofglobaleconomicgrowthisexpectedtooccuroutsidetheU.S.through2020.Despitethesebenefits,veryfewfirmsactuallyexport.Somearetoopreoccupiedwiththeday-to-dayconcernsofrunningabusiness.Othersarehinderedbylackoffinancing,hightariffs,languagebarriers,anddifficultylocatingsalestargets.Themajorityofexporterstendtoexportinconsistently,whichhasworseeffectsonfirmperformancethannotexportingatall(duetosunkcosts).Whilestateandfederal9RobertSalomonandJ.MylesShaver.“LearningbyExporting:NewInsightsfromExaminingFirmInnovation.”JournalofEconomics&ManagementStrategy14no.2(2005).10JosePla-BarberandJoaquinAlegre.“EmpiricalApproachtotheSequentialRelationshipsbetweenFirmStrategy,ExportActivity,andPerformanceinU.S.ManufacturingFirms.”InternationalBusinessReview13(2007).11McKinseyGlobalInstitute.“DigitalGlobalization:TheNewEraofGlobalFlows.”(2016).

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governmentshavewell-establishedexportpromotionprograms,otherEDOsarerealizingthattheyhavespecificrolestoplayinhelpingfirmsconnecttoglobalmarkets.Virginia–TradeDevelopmentforMid-MarketFirmsEstablishedin2002,VirginiaLeadersinExportsTrade(VALET)istheVirginiaEconomicDevelopmentPartnership’sflagshipinternationaltradeprogram.Itisacohort-basedexportacceleratorthatprovideshighpotentialmid-sizedfirmswithbusinessplanningguidance,capital,andexpertresearchresourcesforenteringglobalmarketsandexpandingexports.Recently,thecoreelementsoftheVALETprogramhavebeenmodifiedtohelpdefensecontractorsdiversifyintoglobalmarkets(givenU.S.federalbudgetcutsandsequestration).Anotherrelatedprogramenlistsuniversities,chambers,andindustryorganizationstodriveincreasedusageofVEDPexportresources.Sidebar:ExportsandGlobalEngagement(seecasestudyprofilessection)

• Colorado–AdvancedIndustriesAccelerator

Theme:ExternalInnovationRationaleforthetheme:Externalinnovation(otherwiseknownasopeninnovation)isnotnew,butithasrecentlyachievedmainstreamstatus.LargefirmsareincreasinglyrelyingonvariousformsofpartnershipswithstartupstolowerR&Dexpendituresandbringinnewideas,technology,andtalent.Theyaremotivatedbythethreatposedbyyoung,nimblecompanies:ifcurrenttrendspersist,75%oftoday’sS&P500willbereplacedbynewmarketentrantsby2027.12A2014surveybyKPMGfoundthat88%ofcorporateexecutivesbelievedthattheyneededtocollaboratewithstartupstobesufficientlyinnovative.13Corporationsareinvestingaccordingly:a2015Accenturestudyfoundthathalfofthe100largestcompanieshaveacorporateventureunit,andtheyinvestedtwiceasmuchin2014asin2013.14Onethirdoflargecorporationshaveanacceleratororincubatorprogram.Largefirmsexpecttocontinuetoprioritizemorecollaborativeapproaches:just26%oflargefirmscurrentlyengageinjointinnovationprojectswithentrepreneurs,but38%expecttointhenextthreeyears.Forstartups,thesecorporatecollaborationscanprovideahostofbenefits,includingaccesstoalargecompany’scustomerbaseandsupplychain,marketknowledgeandexpertise,andfunding.Corporatecollaborationsalsoofferopportunitiesfortestingproductsatscaleandestablishingabrand’slegitimacy.Whileclearlymutuallybeneficial,thistypeofcollaborationdoesn’thappenseamlessly.Blameoftenfallsontheculturaldividebetweenflexible,fast-movingstartupsandbureaucratic,risk-aversecorporations.Assuch,anumberofpublicandprivatesectorintermediarieshavesteppeduptofacilitateconnections.12Innosight.“CreativeDestructionWhipsthroughCorporateAmerica.”(2012).13ValeriMocker,SimonaBielli,andChristopherHaley.“WinningTogether:aGuidetoSuccessfulCorporate-StartupCollaborations.”Nesta.(2015).14Accenture.“HarnessingthePowerofEntrepreneurstoOpenInnovation.”(2015).

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Illinois–IllinoisCorporateStartupChallengeTheIllinoisCorporateStartupChallenge,startedin2013,aimstobuildthecapacityoftheIllinoistechandinnovationecosystembyaddressingtheinefficienciesthatpreventcorporationsandstartupsfromproductivelycollaborating.Theprogramisessentiallyahighlycuratedmatchmakingprocessbetweencorporationsinneedofinnovationandstartupsworkingonrelevanttechnologies.Itisdesignedtocreatereal,tangiblebusinesspartnershipsintheformofpilotengagements,jointventures,orinvestments.UpstateSC–Mid-MarketInnovationthroughCorporateR&DCommercializationTheUpstateregionofSouthCarolina,inpartnershipwithClemsonandthestate,iscreatingwaysforsmallandmid-sizedcompaniestocommercializenewandunderutilizedR&Dintheregion’smajorcorporations,primarilyintheadvancedmaterialscluster.Thisinitiativewilltaketheformofanopeninnovationplatform,IPcollaborationtoolkit,andsupportiveeffortsbyEDOs.Itisdesignedtohaveimpactbeyondthedirectbenefitsofcommercialization.First,bydevelopingamorecollaborativeecosystemthroughconnectionsbetweenmajorcorporationsandsmallerfirms,theUpstateAllianceaimstoattractforeigninvestmentfrommanufacturersthatvaluesuchcollaboration.Second,byhelpingsmallerfirmsgaincredibilityandexposurethroughinnovationpartnershipswithlargerfirms,theUpstateAllianceaimstodriveglobalventurecapitalandM&Aactivitytowardscompaniesthatmaynotpreviouslyhavebeenontheradar.Sidebars:ExternalInnovation(seecasestudyprofilessection)

• OhioandAtlanta–OpenInnovationPlatforms• Pennsylvania–InnovationWorksInnovationAdoptionGrant• Milwaukee–WaterCouncilInnovationPlatformandCorporateChallenge

Theme:MergersandAcquisitionsRationaleforthetheme:Mergersandacquisitions(M&A)areagrowingmarketforce.ThoughoftenunknowntoEDOs,manyfirmsareactivelyseekingtobeacquired.Inasurveyoffirmsfromavarietyofindustrieswithrevenuefrom$5millionto$25million,morethanathirdwereinsomewayengagedintheM&Amarket–9%werecurrentlyinvolvedinatransactionandanother27%wereopentothepossibilityinthenext12months.Thevastmajority(87%)offoreigninvestmentintheU.S.takesplaceviaM&A.AndM&Aisaparticularlypervasiveforceforventure-backedstartups,accountingfor84%ofexitssince2010.15DespitetheprevalenceofM&A,EDOshavenottypicallybeeninvolved.TheyhaveviewedM&Aasahighlyconfidentialprivatesectorundertakingthatdoesn’tdirectlycontributetojobcreationgoalsandcanbepoliticallyrisky.Thatview,however,isbeginningtoshift.MoreEDOsarerealizingthatM&Acanbegoodfortheacquiredfirmandtheregion.Positiveoutcomesforacquiredfirmscantaketheformofamajorcashinfusion,accesstomanagerialandtechnicalexpertise,higherinnovationproductivity,andtheabilitytoexploitglobaldistributionchannels.Further,EDOsarerealizingthattheycanplayarolein15NationalVentureCapitalAssociation

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facilitatingdealsthatarelikelytohavepositiveimpacts,andpositioningthefirmandregiontobetopcandidatesforfollow-oninvestmentfromtheacquirer.SanDiego–M&AMatchmakingandAftercareBiocomandtheSanDiegoRegionalEDCbothworktoshapeM&Abymakingconnectionsandthenprovidingaftercareservicespost-transaction.AmainareaoffocusforBiocomis“capitaldevelopment”formemberfirms.ThisrevolvesaroundeventsthatenablelargepharmaceuticalfirmsfromacrosstheU.S.andworldtomakeconnectionswithlocalstartupsinordertoinvestinthemoracquirethem.TheSanDiegoRegionalEDCledthedevelopmentofaregionalforeigndirectinvestment(FDI)strategy,amajorcomponentofwhichistoproactivelyrespondtoM&AactivitythroughaftercareprogramsandensurethatSanDiegoiswellpositionedforfurtherinvestmentandexpansion.Sidebar:MergersandAcquisitions(seecasestudyprofilessection)

• Korea–KOTRAGlobalMergers&AcquisitionsSupportTheme:CityPartnershipsRationaleforthetheme:Urbanizationisoneofthedefiningtrendsofthe21stcentury.By2025,closeto60%oftheworld’spopulationwillliveinurbanareas.Thisurbanboomiscreatingmanychallenges,andthereforeopportunitiesforinnovation.Accordingtoa2016WhiteHousereporton“TechnologyandtheFutureofCities”,urbaninnovation–includingcleanenergy,watersystems,constructiontechnologies,andurbanapplicationsoftheInternetofThings–isa“multi-trillion-dollarworldwideopportunity”forbusinesses.FrostandSullivanpredictthattherewillbe26global“smartcities”by2025,andthatthesewillrepresenta$1.5trilliondollarmarket.Manycitygovernmentsarerespondingtotheopportunitiespresentedbynewurbantechnologies.Theyarehiringchieftechnologyofficers,usingdataanalyticstopredictandsolveproblems,anddeployingsensorstomonitorairquality,trafficconditions,andsafetyissues.Afew,however,aregoingonestepfurther,findingwaystopartnerwithtechstartupstosolvepressingurbanissues.Indoingso,theyareseekingtoachievetwogoalsatonce.First,theyarefindingnewwaystoaddresschallengingcityproblems.Second,theyaresupportinglocalinnovationandtechnologytransferbyhelpingresearchersandstartupsusethecitytotest,scale,andultimatelycommercializetechnologies.Thiscollaborationdoesn’thappenwithoutproactiveeffortsbycitygovernmentstomakedataavailable,streamlineprocurementprocesses,andenablestartupstousethecityasatestbed.Chicago–UILabsCityDigitalCityDigitalisacollaborativepartnershipthatbringstogethercorporations,academicresearchinstitutions,andthecitygovernmenttotestandcommercializenewsolutionsinareassuchasphysicalinfrastructure,energymanagement,transportation,andwaterandsanitation.CityDigitalworksbyrunningpilotprogramsthatdefineanareaofneedforinfrastructureinnovationwithcitypartners,identifyappropriatetechnologiesbeing

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developedinIllinoisstartupsandacademicinstitutions,andthenenableresearchersandentrepreneurstousethecityasatestfacilityandfirstmajorcustomer.Philadelphia–FastFWDAcceleratorFastFWDisa12-weekbusinessacceleratorthatconnectsentrepreneurswithstafffromeightcitydepartmentstocollaborativelydevelopnewapproachestocityproblems.Itsfirsttwocycleshaveincludedatotalof18startups.TheprocessisrunaccordingtoanacceleratorcurriculumdevelopedbyGoodCompanyVentures,enhancedbytheactiveinvolvementofcityofficialsandresearchsupportfromWharton’sSocialImpactInitiative.Theprogramalsofacilitatesconnectionswithfundersthatcanhelpfinanceandscalethoseapproachestoothercities.UnlikeCityDigital,FastFWDhasfocusedon“socialentrepreneurship”technologiestoaddressissuessuchaspublicsafety,housing,andcommunitystability,ratherthaninfrastructure.Implications:Post-PipelinePhase

• IfTEDCO’smissionistogrowjobsandtheMarylandeconomy,thenitmustbeconcernedaboutwhathappenswithcompaniesaftertheygraduatefromitscurrentsetofprograms.

• IfTEDCOdeterminesitisnotgoingtodirectlyworkwithcompaniespastitscurrentpipeline,thenitneedstoidentifywhichorganizationsareprovidingthoseservices,shareindustry-andfirm-specificknowledgewiththem,andworkwiththemtoprovideasmoothandeffectivetransition.

• IfTEDCOfindsthatcertainpost-pipelineservicesarevitaltoitsfirmsbutnoorganizationcurrentlyprovidesthoseservices,thenitwillneedtoeitherprovidethemitselforworkwithotherorganizationstodeterminewhocouldprovidethem.

• IfTEDCOwantstoensurethatitsclientfirmsreceivethebestpossibleassistanceaftertheygraduate,theymayneedtoaccompanythosefirmstoconnectthemwithpotentialfundersandothereconomicdevelopmentserviceproviders.